Category Archives: Neo-Liberal economics

Bankers the unruly and uncontrollable children in the family

Politicians seem to think that as they can manage their own family budgets, they have all the knowledge necessary to manage the economy. This results in statements such as the government needs to balance its books or that the country has maxed out its credit cards. Such statements demonstrate an appalling ignorance of the economy and how it works. However there is a competence that is lacking at the most elementary of levels,  as too many MPs are appalling at managing their own finances. Disraeli one of the greatest leaders of the conservative party was always on the verge of bankruptcy because of his extravagant lifestyle. Fortunately he had a rich wife and friends ready to bail him out. Politicians are as likely to follow his example as they are that of his prudent rival Gladstone. The recent expenses scandal when it was demonstrated that most MPs used their expense account to finance their comfortable lifestyle. People still remember the MP who used his expense account to pay for a duck house. If financial rectitude is not characteristic of many MPs This should give pause to any claim that they are capable of managing the economy.

If the analogy of family finances is to be made it should be said that the government resembles the nominal head of an unruly family, whose views are largely disregarded by the family members. The unruly children in the family take little notice of the head of the family, only listening to them and accepting their authority when they get into trouble. The banks are the obvious example as they pay minimal heed to the authority of the government except in times of crisis such as during the financial crisis of 2008.Once the crisis passed the banks forgot their need for government support and showed a lack of gratitude to the governments actions for bailing them out during the crisis. They successfully prevented the government from introducing a reform which would have separated their retail banking activities from those of investment banking. If a bank fails  in future the government is still on the hook, as it can’t protect the individual customers of the bank without bailing it out for the much larger losses incurred by its speculative investment banking arm.

This is no small matter as the combined assets of the banks are in total ten times the value of our national GDP.    Our national GDP is the country’s national income. There are four large banks in the UK and it is not unreasonable to suggest that the assets of each is in total a sum near to, equal to our GDP or greater than it. In the event of a failure of one of the large banks the government could be called on to raise a sum equivalent to our national income to bail them out. At one time during the crisis of 2008/9 the government of Gordon Brown had to pledge a similar figure to our banks creditors to prevent a run on their finances. Fortunately the banks creditors did not call on our government to make good this pledge, they were satisfied with the the pledge alone. When the next crisis occurs the country may be less fortunate.

When I describe the banks as unruly children over whose actions their parent has little control, there are numerous examples I can cite of such behaviour. Britains biggest bank is HSBC and Standard Chartered is its branch in the US. This bank almost lost its licence to conduct banking in the USA because of its money laundering activities. Only the pleas of the British Chancellor of the Exchequer prevented the American financial authorities from withdrawing its banking licence. It had lost its licence to bank in the USA, its parent bank HSBC would have been in serious financial trouble and it would have had to ask the British government for financial support to enable it to cope with the crisis.

The family finance analogy of which so many politicians are so fond of using describes so well the activities of the banks. The banks are the prodigal children who can behave as badly and irresponsibly as they wish as they know that their parent the British government will always come to their aid no matter how badly they behave.

In Britain as in most countries the politicians are content to remain in ignorance of these unpleasant truths. They believe that their homespun economics all they need, or they are ideologues who believe that the great prophets of economics Hayek, Friedman and Rand said all there is to be said about economics and the managing of the economy. This last group believes that all the answers to matters economic are to be found in books such as ‘The Road to Serfdom” (Hayek) or ‘Atlas Unchained’ (Rand).

There are a small group of politicians who understand the problems of which I have written, but they are only too willing to pretend that all is well in return for government office or employment as well paid lobbyists for the financial sector. Money is incredibly effective balm for soothing fear.

I am not the first person to express concern about the appalling ignorance of our politicians. Leo Amery looking around at his fellow politicians in the 1920’s said that the country would be better served, if there was  separate parliament consisting of industrialist and trade unionists to manage the economy and industrial policy.

Sensible economics and other nonsense spoken by politicians

Recently a speech given by our former Prime Minister on the topic of sensible economics caught my attention. There is growing agitation in the country for the end of austerity. An economic policy that has failed to achieve any of its targets. Realising his heritage was at stake he gave a speech explaining why it would be foolish to abandon this sensible economic programme which he had initiated. For this man and all practitioners of sensible economics, the growing numbers of people using food banks,  stagnant or falling incomes etc. are not a sign of policy failure. What people failed to understand he said was that these sacrifices were necessary for the greater national good. Sacrifices which were necessary to rectify the failings of past governments.The problem was not bad economic policies but the impatience of the ignorant majority.

Sensible economics is convincing because all the words in which it is spoken are suggestive of  good sense. It is so convincing that it has become the accepted dialogue in which the economic debate is conducted. Who could be against sensible economics when it states that the ‘books must be balanced’ and that we should guard against ‘paying ourselves more than is prudent’. Any deviation from the path of sensible economics such as a return to ‘tax and spend’ threatens to return the UK to the bad days of the past. However sensible economics is not economics, its just a number of moral and commons sense phrases that one would hear in conversations at the golf club bar or at the dinner parties in Notting Hill, which have become the authoritative dialogue in which all matters economic are discussed.

Sensible economics does appear to offer a number of simple policy solutions to today’s problems that all can understand. Everybody knows that civil servants contribute little of value to the economy, so the best policy is to reduce their numbers to reduce costs. An argument that is so convincing that all governments over the past thirty years have done this. A good government is one that employs less civil servants than it did than when it first came into office. Ignored by the various governments is that these civil servants provide an invaluable source of expertise necessary for good government. Our rail industry’s record over investment decisions is one of constant failure. Projects have been badly managed with so many cost over runs that they government has been forced to cancel a programme of electrification of the rail network, because it the funds for this programme have been squandered on other projects. While the government can blame incompetence in the railways on others what it cannot do is shift the blame for other major failures. Regardless of reforms implemented as part of sensible economics programme the economy is preforming as badly as ever or even in some examples worse than ever, as is demonstrated by the trade deficit. The UK’s trade deficit is not only the highest as proportion of GDP for a developed country but it is worsening.

I can quote an example of this thinking from my local community network. When I expressed concern about an overly slow response time (30 minutes) by the police to a serious crime in which a member of my family was involved; I was told by a number of correspondents that this was not due to a lack of police numbers, but bad police practices. According to them the police did not respond to a young man threatening shop staff and customers with a hammer;  because they were too busy completing their paper work, too which they gave priority. Sensible economics has permeated throughout society so thoroughly that even the most nonsensical of statements such as this one are believed. In fact the reason for the delay was that the police needed time to assembly a team armed with tasers. All such teams at the time of the incident were otherwise engaged.

Perhaps the best explanation of the sensible economics being the only dialogue in which the economic debate is conducted comes from the writings of Foucault. Risking over simplifying his work, what he states is that control of society comes from the control of language. Language is the language of the powerful, as the meaning of the words used in the public debate are  given them by the powerful. Such as the following: the poor are welfare scroungers, poor because they are indolent  and lacking in initiative. It is their personal failings that explain their poverty. Welfare programmes only encourage this indolence and should be cut back.  If welfare programmes are wasteful it provides a reason for the wealthy to avoid taxes, as there taxes will only wasted on the useless poor.  When this becomes the authoritative dialogue in which public debate is held  it becomes the prism through which any thing of any significance is viewed in society. Only yesterday I read in the papers that public servants have lost there public service ethos. What nurses today lack it is  the care and compassion that motivated their predecessors. When the public debate is conducted in terms that vilify them, it is easy to deny nurses their claim for a living wage.  This is the stuff of sensible economics, it nothing more than a means of entrenching the power of the rich and powerful, through denying a hearing to the alternative view.

Sensible economics or Neo-liberalism has had an easy ride. Rather than challenging the tenets of this dialogue, social democratic and opposition parties have been over impressed by the electoral success of the right and adopted its language. They remain the opposition in name, as they believe that elections can only be won by adopting the policies of sensible economics. It was the former social democratic government that introduced the unfair mean testing that the current government uses to deny the poor and disabled their welfare claims. When the opposition adopts the language of its opponents, it is signalling that it has lost the argument, its surrendered to its opponents.

What Foucault failed to understand is that the dialogue of the powerful is not all pervasive. There are other ideologies and dialogues in society.* Perhaps best described as the dialogues of the loser. Sociologists have a term that describes these dialogues, soteriology. These are dialogues that explain why certain groups are unfairly disadvantaged and discriminated against. Socialism is one such soteriology which was accurately described by Durkheim as a ‘cry of pain’.

These subordinate or challenger dialogues appeared to disappear because of the all pervasiveness of sensible economics. The media is largely controlled by billionaires who could deny a voice to any alternative messsage. The parliamentary left having adopted the ideologies of sensible economics for fear of losing the access to power have been a useful ancillary in suppressing the alternative dialogues, as to admit the validity of other dialogues would demonstrate the falsity of the current policies.

However as the failures of sensible economics has become more apparent, this dialogue has been losing its grip on the popular imagination. When the Prime Minister dismissed a nurse’s claim for a living wage, as there being no money tree, she stretched credulity too far. The narrative of nurses being forced to go to food banks because of low pay was to well entrenched in the public imagination to be so easily dismissed. Also a dialogue that claims to be authoritative discredits itself when it resorts to childish language borrowed from fairy tales.

Once a challenger dialogue or ideology is giving public space it becomes harder for the dominant ideology to maintain its dominance. Sensible economics strength comes from it being the authoritative source of truth. Once it is questioned its authoritative voice seems to become less authoritative and truthful. It cannot stand public scrutiny. This public scrutiny has come from the opposition party which has become infected with a challenger ideology. No longer does the opposition repeat the truths of the governing party but it challenges them. Often demonstrating that the ‘emperor really has no clothes’, the new social media gives a voice to these new challenger dialogues. They have been so effective that a media baron who considered himself the kingmaker, a man who believed that politicians could only succeed if they had they his support, discovered that social media had destroyed his power. He ran a sustained campaign of invective against the socialist leader of the opposition in his media outlets but failed prevent the opposition taking effective power away from his nominee.

This essay is not intended to argue the superiority or otherwise of challenger ideologies such as socialism but to suggest that when there is a dominant unchallenged dialogue the result is poor government policy making. If decisions are made in accordance with the established truths of sensible economics and are never subject to challenge from believers in alternative dialogues silly decisions can be made. The government as an economy measure reduced the naval planning and ship design departments to a bare minimum. Consequently when the navy wanted to build a fleet of modern warships they lacked the ship design expertise and had to buy in help from the Americans. Unfortunately the poor standard of oversight meant these billion pound ships when delivered to the navy proved to be faulty, they were prone to engine breakdown. At one time the new Type 45 destroyers were in dock together, unable to put to sea because of faulty engines. If there was a strong political opposition either inside or outside parliament such poor decision taking would be less likely to occur as policy decisions would be subject to criticism. In such circumstances the folly of dismissing nearly all of the navy’s ship design staff would have been highlighted. When sensible economics dominates the political debate, it being nothing more than a collection of common sense phrases it encourages policy making made in ignorance. It is a doctrine of no expertise, any politician can grasp its essence so why need to consult experts.

  • This idea of different ideologies competing for dominance I have borrowed from Antonio Gramsci

Spurious economic thinking from our politicians. Inflation is not the greatest of evils, in fact the opposite can be true

Over the last few days, there has been series of government ministers trotting out the same tired explanations of why a pay cap is necessary for the workers in the public service. These are two, the first is that the public finances are insufficient to finance a wage increase and that any such increase would only increase the national debt. There was the famous television broadcast in which the Prime Minister told a nurse that there was no magic money tree, an argument she has since undermined by her own actions. However what I want to demonstrate is the fallacious nature of the second reason giving for denying public sector workers a wage increase. This is the argument that it will be inflationary. The incorrect assumption these politicians make is that inflation is always bad. It’s not sufficient to say that taking a certain action is wrong because it can increase inflation. There are circumstances in which inflation can be good.

Price rises are welcome when the price increase is a consequence of the worker/s being paid a fair wage. Wages have fallen so low that nurses and other public sector workers are having to go to food banks so as to be able to feed themselves and their families. One of the unfortunate consequence is that now more nurses are leaving the NHS than are joining it. If we wish as a nation to have a health service that is able to deliver high quality care more money must be found to pay the health service staff. The cost of health care will rise but would this would be outweighed by the benefit to national as a whole.

The government would say that to increase the incomes of the thousands of public sector workers would be inflationary. These workers must continue to bear the pain of low incomes, as to do otherwise would be to threaten the nations well being. This is a totally fallacious argument, as what this inflation would represent would be a change in power relationships within the economy. Public sector workers will now as group have a much larger share of the nation’s incomes. As they spend there increased incomes demand for goods and services will rise and so will prices. One consequence of this is that other groups will find that there purchasing power is diminished.

There will be some unfortunate consequences in that workers in the private sector on low incomes will suffer disproportionately from price increases. However this could be offset by an enlightened government increasing the minimum wage to compensate for the reduced value of their incomes. Many workers will themselves solve this problem by transferring from poorly paid work in the private sector to better paid work in the public sector. There is within the economy an automatic adjustment mechanism, in that private sector employers will have to increase the wages they pay their staff if they wish to retain them. There is no great harm to be inflicted on the economy if inflation increases from its current rate of 2.9% per annum to 4 or 5%. This was the average rate of inflation throughout the 1950s and 60s and economic growth was then at its highest.

From within the private sector there will be siren voices arguing against this saying that they cannot afford to run their businesses with wage costs so high and that they will have no choice but to dismiss workers. Against this argument is the compelling moral one, if they are such rotten employers that they can only run their business if they pay wages so low that the employee is forced to turn to the food banks or to the government for wage supplements such as tax credits they deserve to close. There will be a temporary increase in unemployment and this will require a more generous approach to the payment of unemployment benefits from the government. This will only be a temporary increase, because the increased spending of the public sector workers will kickstart an economy which is at present in the merely idling mode. Economic growth will increase and so will the demand for newly unemployed workers.

One particular imagined scenario gives me pleasure. The City banker with an income of £100,000 plus will now find that as a consequence of the increased wages to the barista, there morning cappuccino will have increased from say £2.50 to £3.00. Having worked with such people I can imagine the indignation they will express at having to pay more for their coffee. Such people will see it as threat to their life style. Rich and super rich people will be able to buy less of the time of the less well off than they did formerly, which will hurt. There will be a return of the servant problem of the 1960s, when the rich found it difficult to recruit people willing to work long hours for low pay in personal service. Once wage rates and employment opportunities were available elsewhere the number of young women willing to enter domestic service dropped dramatically.

What needs to be prevented to stop inflation getting out of hand, is measures to stop the group that has most benefitted from the low wages of the past decade from over compensating for the loss in there purchasing power by disproportionately increasing their incomes. These people are those in the private finance sector, those whose wealth comes from large property holdings and company directors. This can simply be done by re-introducing a progressive income tax, together with a wealth tax and an effective capital gains tax.  The effect of these taxes will make it less desirable to earn excessive incomes, as a significant part of any increase will be taken in tax.  The tax take from this new taxes would help with funding of the public service sector.

There is one group that would be the losers from an increased inflation rate and that would be pensioners such as myself. The income I receive is fixed for a year and it would diminish in value as the year progressed, and although I do receive an increase in my pension at the end of the year equal to the new rate of inflation, that will not compensate for the erosion my income during the past year. However I will benefit from knowing that the health service is better funded and that my generation are the ones most likely to benefit from increased spending on this service.

Why we need economists

Being a former social worker and state secondary school teacher I am used to belonging to a profession that is disparaged in the media. Now I find that being an economist means that I am subject to similar vilification. What made economists (or rather the good economist) so disparaged is that they tell inconvenient or awkward truths about the economy and society. When faced with such truths politicians and the powerful will resort to abuse to silence the truth tellers. What is remarkable is that we have a parliament dominated by graduates from our elite universities and yet they are in greater ignorance of the world around them, than the parliaments of the past! Parliaments that were mocked for having too many of trade unions and country squires, men supposedly lacking in education and knowledge of the world around them.

Having made this declaration I must now produce the evidence to defend my assertion. These awkward truths usually are warnings about coming troubles that politicians would prefer to ignore. When the great crash occurred in 2008/9 politicians claimed that it was a once in a lifetime event that could never have been predicted. An economic act of God. The truth is that all the warning signs were there and instead of acting on them politicians refused to act, as any action taken would have been cutting spending and that would have been unpopular with the electorate. There were two causes of this crash were the banks irresponsible lending policies, such as 125% mortgages. The other guilty party were the governments and central bankers who rather than regulating the market for the greater public good, preferred to turn a blind eye to the irresponsible behaviour of the bankers. Their justification for their inaction was the doctrine of neoliberal economics, which states that economic well being is maximised under the free market economic system.

I suspect that those trade unions and squires of the past would not have been so gullible, as they had a superior understanding of human nature. They from their dealings with bankers would have known that these men were not the giants of the financial world but men as fallible as themselves. These men would have recognised that greed for ever greater and greater financial rewards motivated these bankers.

Awkward truth warning – little has changed since 2008 bankers are still lending irresponsibly and the government is still turning a blind eye to such behaviours. One area of concern is car finance, it is suggested that car dealers in their desire to sell more and more cars are not paying sufficient attention to the ability of their customers to fund their repayments and the risk is that these buyers will default in the future on their loans. This will cause the defaulting customers to return their cars leaving the dealers with an unsold mountain of cars other hands. This would in itself be sufficient to cause another economic downturn. The banks who source the funds which enable the car dealers to offer generous financial terms to buyers, rather than offering a word of caution or refusing to increase there lending to the dealers just continue to shovel cash in their direction.  Other forms of bank lending such as to the property market suggest that bankers have not learnt the lessons of 2008 and unfortunately neither has the government.

As an economist you learn to read the runes, in my case as I have no access to government statistics, it is those short comments in the financial section in the newspapers that give the game away. In this case it was a short piece of no more than three or four lines. A financier was asked if the Bank of England was now cracking down on irresponsible lending to prevent a repeat of 2008/9. His answer was no, as the governor knew that if he reduced borrowing he would cause an economic slowdown, which would increase unemployment with all its associated problems. If I read the article correctly little has changed since 2008.

I also realise that the banks have fought tooth and nail to stop the governments of Europe and the USA to make them resilient in the event of any future crisis. British banks have successfully persuaded the government that reserves of 3% are sufficient to enable them to ride out any future crisis. European banks have even smaller reserves. These reserves are either cash or assets that can be easily turned into cash to meet the demand for cash from their customers. (A greater ratio of assets to lending would limit the money banks could lend and in consequence reduce their profitability.) The suggestion is that in an event of a repeat of the financial crisis of 2008 the banks will lack sufficient reserves of cash to enable them to meet their customers demands for money. In a crisis customers fearing the future will withdraw their savings from the bank, either because they doubt the loudness of the bank or they want money in hand to deal with any future crisis. It will only take one bank to close its door for a general panic to ensue with the consequence that the government yet again will have to step in to bail out the banks. If the banks held greater reserves as have happened in the past such temporary crisis could easily be resolved  The banks would have sufficient quantities of cash in reserve to be able to pay those panicking customers who wanted their money back. Once it was seen that the banks had plenty of money the panic would cease. However if banks have insufficient cash reserves the whole system is liable to collective failure. If only one bank has to close its door, because it cannot meet its customers demands for cash, the contagion will spread and there will be a major run on the banks. Yet again the government would have to rescue the banks from their follies of their own making.

However we tellers of awkward truths have a problem. We cannot predict exactly what will happen or  when. We are tellers of possibilities and probable truths and us such we can be easily discredited. Economist predicted that a vote to leave the EU would have a negative impact on the economy. Then when in the days after the Brexit vote, the economy failed to collapse the naysayers could claim that they were wrong and that the collective opinion of economists was worth no more than that of the collectivity of politicians. What these naysayers overlooked was  that the Governor of the Bank of England being all too aware of the negative impact of a Brexit vote took immediate action to offset its negative economic impact. He simply increased the amount of to the nations borrowers enabling them to go on spending spree which prevented the economy from taking a nose dive. What the naysayers don’t realise it that it is a crisis postponed  not as they believe an imaginary economic ghoul or nasty conjured up from the feverish imaginings of the economists.

There is one prominent economist or truth teller who has consistently, warned of the impending credit crisis but is consistently ignored by governments and that is Anne Pettifor. She is never called to sit on the committees that governments set up to advise them on matters economic, as they don’t want to hear her truths. She has written extensively about the impending first world debt crisis, yet like some unheard of  Old Testament prophet her writings remain in obscurity.

Our one weakness as economists is that we cannot say exactly when or how or what we predict will happen. Even more frustratingly we can be right but events prove us wrong. There are no economists that can accurately predict the future, we are the scientists of the possible or the perhaps. The economy is such a volatile and complex construct that sudden and unexpected changes can make fools of us. This is why a leading politician* can say with confidence  ‘we have had enough of experts’ (meaning economists) and be praised in the media for his sagacity and foresight.

Yet our awkward truth remains the economies of Western Europe and the USA are over indebted and not one government has taken any realistic debt reduction measures. The fact that Britain with Japan shares the unwanted title of the most indebted of developed countries has passed our politicians by. They will speak endlessly about the public sector or government indebtedness, but they are focusing on the mice in the room while ignoring the elephant that is private sector indebtedness. Prior to the crash of 2008 government debt was less then a tenth of private sector debt. While great pains have been taken to reduce government debt little has been done to reduce private sector indebtedness*. This indebtedness will possibly rise to unheard of levels as the Governor has said that he is relaxed about the possibility of banks increasing their assets to nine times the size of GDP. Banks assets are loans, so he is relaxed about the banks increasing the nations debt to nine times the total of its wealth!

*Michael Gove a prominent politician who campaigned for Britain to leave the EU

* A policy practice that is common to all Western European governments.

Contemporary Britain, a country dominated by Nietzsche’s untermensch (under men)

Nietzsche hated democracy because it makes possible the rule of the common man and the suppression of the superman. A term that Nietzsche uses to describe the common man is untermensch or underman, a term which was open to misunderstanding and abuse. What he meant by the untermensch was a man who lacked the potential to live the life of a ubermensch or superman. What was never understood was that for Nietzsche the distinction was based on intellect and character, not power or physical strength. Originally he named the saint, artist and philosopher as his supermen. Even his dislike of Christianity as the religion of slaves did not stop him admiring Christ as a possible superman. He admired Christ as a founder of a religion but despised Christians for slavishly following the beliefs of another. What I think is most useful is his description of the untermensch as those in thrall to a slavish culture. People incapable of independent thought. When I look at the British parliament and the legislatures of other Western nations it seems obvious that we live in an age of the untermensch.

What the untermensch share is a slavish adherence to a common culture which means that politicians of whatever political stripe, will all give the same replies to questions on policy. These are a few examples which demonstrate this clearly.

In Britain the housing market is broken and many people are forced to live in private rental sector. Properties in which they have no security of tenure and for which they pay ever increasingly exorbitant rents. Whenever it is suggested that these tenants should be given security of tenure or have their rents controlled, the same parrot cry comes from politicians, whether of the parliamentary left or right, that such controls would only make matters worse. They claim that such controls would force landlords to withdraw from the market, reducing the number of properties for rent and so making the situation worse for tenants.

Britain’s railways are the most expensive and some of the least efficient in Europe. When it is suggested that these railways should be taken out of private ownership and returned to the state, it meets with howls of derision from the collective parliamentary body. Everybody in parliament knows that the state is peculiarly unfitted to run business and businesses such as the railways are best left in private hands. The solution to the problem is as every parliamentarian knows is to transfer the railway franchises to more efficient private owners.*

There are many other examples of the politicians collective thought that could be mentioned. What is common to these practitioners of politics is a hatred of those that think independently, they expel or seek to suppress from the collectivity of politicians those who think differently. At present the parliamentary Labour party is seeking to purge itself of a leader who thinks differently. A glance at the politics of contemporary Europe provides evidence that those who think differently have no place in the mainstream political parties, they have to come from insurgent parties such as Podemos in Spain or The Five Star movement in Italy.

One common place truth of contemporary political analysis is that the political elites have lost touch with the people. It is a resentful and sullen people that turn to the populist parties of the right. These parties at leas recognise the pain of the people, something that the political parties of the left fail to do. Durkheim called socialism a cry of pain, the parliamentary socialist parties of today no longer this truth. Rather than ignoring the people, parliamentarians are following a culture that denies the validity of other expressions of the truth other than its own. Truths that might appear obvious to the people are to politicians merely uninformed opinions.

Another demonstration of the untermensch mentality is the slavish following of opinion polls. Rather than leading, politicians prefer to follow, all to often they are prepared to abandon their principles because the people as expressed a different views to theirs in an opinion poll and the peoples will  must be respected. Never do they consider that they are elected to lead the country, they prefer to follow.

The language of politics is so often that of the untermensch. One of our most popular newspapers is said to ensure that all of its content can understood by the average thirteen year. It does not tax its readers with difficult text or content. Similarly our leading politicians prefer the language of the thirteen year old which are  expressed in what are meaningless phrases or slogans. Our current Prime Minister is campaigning for re-election with a series of simple phrases, such as that she will provide ‘strong and stable government’ as opposed to the opposition who represent a ‘coalition of chaos’. She it seems feels no need to present a detailed and reasoned manifesto to the electorate.  A vague and rather meaningless manifesto will suffice and that is all she and her advisors believe is necessary is a few repeated slogans to get out the vote.

Defenders of the present political system will argue that the overwhelming majority of parliamentarians not only went to university, but elite universities and got good degrees. However the very intelligent can be members of the untermensch, as its a mentality or way of thinking and it is as much about  character as intellect. Politicians rarely stray beyond the party line or parliamentary consensus of views, they sacrifice their individuality on the altar of group think. What Nietzsche’s supermen do is to challenge the conventional thinking of the time. When politicians continually speak and think in the language of the average thirteen year old, it cannot but deform their personalities. What at first becomes a means of communicating with the masses through does through constant repetition become incorporated within their personality. They take some of the characteristics of what they affect to despise, the common or under man.

While I think that Nietzsche’s understanding of British democracy is correct today, it has not always been the case that the British parliament promotes the mediocre at the expense of the talented. Today parliament has been overtaken by the culture of the untermensch, whether its expressed in terms of loyalty to the one’s party, obedience to the will of the people or submission to the dominant Westminster belief system. In previous times there has been a much more vigorous culture at Westminster, one in which individualist thinkers could thrive and even achieve the highest office. What is needed is an ending of the stranglehold on Westminster culture of the parties of the consensus, then politicians of an independent mindset will begin to flourish there.

There are those who will have a different understanding of Nietzsche’s concept of the superman. Mine derives from the earlier writings of Nietzsche, as his understanding of the superman did change in his later writings. Obviously those who have read ‘The Will to Power’ a book created by his sister out of his notes will have a very different understanding. Personally I think that this understanding of Nietzsche’s superman is invalid and of little intrinsic merit.

* Any independent minded economist could easily expose the flaws in such thinking.

Fake Economics and the Great Shock Theory of Economics

This is the age of fake news it is also the age of fake economics. One such is the Big Bang or Great Shock theory of economics. It is the policy preference for those politicians that have a disdain for the facts. They have an impatience with the world of fact or reality as it does not fit with their view of the world. In a very prescient film ‘Who Shot `Liberty Valance’ , John Ford has one memorable line in the film in which the news editor states that ‘when the facts become legend, print the legend’. This very much describes today’s politicians who have a preference for their ‘legend’ or story over reality. One consistent and common story is that by administering some great shock to the economy they will shake it out of its torpor and kick start a new dynamic economic era.

Believers in fake economics or the story predominate in the politics of the Anglo Saxon world whether its in the form of Donald Trump or Theresa May. The latter believes the necessary shock treatment that will revive the UK economy is the leaving of the EU. Once firms are deprived of their cosy relationships with the European market, they will be forced to find new markets outside Europe (or go out of business). The necessity of finding new markets for their products will inject a new dynamism into business, so transforming British businesses into world beaters. Businesses will now put a premium on those leaders who are doers and the influx of doers into the top levels  of business will have this transformative effect. The proponents of this shock therapy do admit that some businesses will fail to adapt and have to close, but these failures will be more than made up for by the new enterprises that will replace the old failing businesses. However what the proponents of shock theory fail to admit is that the shock is as likely to kill as cure. Evidence from the past suggests whenever the government administers shock therapy to the UK economy it kills more than it cures.

The classic shock treatment occurred in 1981, when the government decided to introduce the reforms that are associated with Neo-Liberalism. The shock killed of 20% of UK manufacturing industry and unlike the theory suggests new businesses did not develop to replace them. One consequence is that the UK now has the largest trade deficit of any developed country (as a proportion of GDP). Good fortune has enabled the UK so far to escape the consequences of this folly, but that good fortune cannot last forever.

Much as in a John Ford movie legend has replaced fact. Politicians generally accept that despite the evidence to the contrary the 1980s were a success story. With such a complex institution as the economy it is always possible to find evidence for your own good story and even when there ar plenty of bad facts, as their existence can be conveniently ignored. Ignorance of the workings of the economy is so widespread amongst the political classes and the media that its easy to sell the fictitious ‘good story’.

One consistent story coming from the government is that British business can find new markets to replace those lost through leaving the EU. India is one of the most populous of Asian nations and it is home to one of the world’s fastest growing economies. This is claimed by government ministers to be one of the new markets British business can exploit.This year India has been the subject of two trade missions to India, one led by the Prime Minister and another by the Chancellor of the Exchequer.  What India requires from the UK is an easing of restrictions of Indian migrants coming to Britain and until that is granted it will not consider a new trade deal. This government has made its priority restricting immigration into the UK and this means that all those trade missions have been in vain. Until Britain makes some concessions on immigration, India will not open up its markets to UK business.

Trade deals with other nations are also fraught with problems that make any negotiations fruitless. Brazil and Argentina are the two largest economies in South America and as such should be a potential markets for UK exports. However there is one issue that prevents a new trade deal being negotiated. These two countries both have a large beef industry and would love to export beef to the UK. However in these two countries the cattle diseases such as foot and mouth are endemic. If the UK accepted imports of beef from these countries it would possibly be importing disease into the country. Then the UK would lose its status as possessing a disease free cattle industry. British beef farmers would then be prohibited from exporting their beef to such as the disease free countries of the European Union. The powerful UK farmers union would prevent such a trade deal, particularly as the governing party is the party of the largest of agricultural landowners. Economic realities mean this is yet another potential market that is closed to UK exporters.

However for the practitioner of fake economics none of this matters. When one of the most significant purveyors of false economics said that the public were tired of experts, what he meant was that they were tired of hearing the difficult truth. They like their political leaders want believe the easy to fictions of fake economics. What fake economics does convey is the false story that the political leaders of this and other countries know what they are doing and that they are making those policy decisions that will be of benefit to the economy and the people. Nobody wants the truth which is that our political leaders have only the vaguest grasp of economic realities and that are doing the equivalent of shooting in the dark.

There is one other great advantage of fake economics. When the train wreck of the great shock inevitably materialises the politicians can claim that is not their fault. They have done their bit in that they  have administered the correct medicine, the failure now is with the patient for not taking the medicine correctly. Business leaders and workers have failed to respond in the correct way, the failure lies with them, not with the government. When one of the major purposes of a policy is to transfer blame to some other party than the policy maker it is always going to be the wrong policy. Being unwilling to take responsibility for one’s actions suggests that at least sub consciously the policy maker knows that they are in the wrong.

Economic magic, the reason why politicians constantly interfere in the running of our schools. Also one economist’s explanation of Britains low productivity economy.

There is one untruth that is always repeated about the baby boomers pensions and the young. Regularly one politician or another states that baby boomer generation has taken such a large share of the nations wealth that little is left for the young. Recently the Resolution Foundation released figures that showed the median income of a pensioner household exceeded that of the of the average working family. This became a media horror story, which the media claimed demonstrated that pensions were to generous. What the media ignored was that the median income for pensioners is not especially high and what it demonstrated was the appalling low level of incomes of the average working family. Rather than as the politicians argued that there was an urgent need to reduce the incomes of pensioners; what it demonstrated was the urgent need to increase the incomes of working families. No politician or media figure stated the obvious which was that even if the median wage of the working family was increased to that of the pensioner household, the former would still have great difficulty in paying their bills.

Britain is a low productivity and low wage economy. Without structural change in the wider economy the majority of families will remain in the category of either the ‘just managing’ or ‘not managing’. Our government and politicians sort of acknowledge the problem by talking about the need for educational reforms, reforms that they claim which will produce a highly educated and skilled labour force. This highly educated labour force will then produce goods or services of a high quality which will be in great demand and will be highly valued. Then these workers will then be able to command high salaries because they will be so highly valued. Sociologists use the term magic to describe behaviour or practices that the practitioners (in this case politicians) believe will magically solve their problems. Of course magic does not exist and neither do the imagined solutions to our economic problems.

One can add the rider that twenty years of educational reforms have produced a workforce that is less productive than ever. Britain is slowly slipping down the world productivity league.

The real cause of the problem of low productivity and low wages is the business model practised by most contemporary businesses. This model can be explained  simply as the minimising the cost inputs and maximising the output of profit. Labour is the most expensive of the inputs and if the costs of that can be minimised profits are maximised. All the reforms of the neoliberal era have made its possible for businesses to minimise wage costs through what can be described as the zero sum or gig economy. What is taken from the workers is given to the business’s owners. Workers are no longer employed by  ‘Deliveroo’ for example but they are independent suppliers, who are contracted to work when there is wok for them. This system achieves a massive cut in wage costs as the independent suppliers are only paid when there is work for them, which means low incomes for the independent suppliers and high profits for the owners. Also the business can pass on many of the other costs of the business to the ‘independent supplier’. They insist that they  buy they own means of transport, whether it be bikes or vans. This has a further benefit in that the independent supplier has to maintain their vehicles meaning the worker and not the employer has to bear the costs of maintenance of the business’s vehicles. Delivery businesses (goods or people) such as Deliveroo and Uber have achieved the nirvana of business perfection. All the firms have to invest in is the computer systems and staff for the handling and dispatching of the customers orders, all other costs are borne by their self employed contractors. When firms invest so little in the business they can only be low productivity businesses.

High productivity requires investment in machinery, and staff training all of which are high cost. As successive governments have reduced workplace protections to a minimum, it has become much easier to make money by squeezing wages and employment costs to a minimum. It is no coincidence that in a high cost industry such as car manufacturing there are no British owned businesses, all are owned by foreigners. Even Britain’s prestige car manufacturers Rolls Royce and Bentley are owned by BMW and Volkswagen. When there is a successful British manufacturer such as ARM, which makes computer chips for most of the world’s smart phones, it is sold by its owners to a foreign company. The owners preferring to live of the proceeds of the sale and live a life less arduous than that managing a business.

Only if the government took on British management and introduced legislative changes that would persuade or compel them to adopt the high input cost business model, would the low productivity problem be solved. However the government and the political class generally see this as a problem to difficult to tackle, so instead they continue with the non solution of constant education reform. In consequence every year there will be introduced by the government a ‘proliferia’ of education reforms. ‘Shouting in the dark’ is a behaviour which is intended to demonstrate that those scared by the horrors of the dark can scare them by talking loudly. Believing the noise they make will show that they are confident of resisting the evil one and force it to turn away to  find an easier prey. Educational reform is a shouting in the dark, politicians hope that if they shout loud enough they will scare away the horrors of the low productivity and low wage economy. Also by shouting loudly they hope to distract the people from the real problems that they are failing to tackle.